Feds agree to release $115 million due Virginia from Medicaid fraud settlement

RICHMOND (June 5, 2013) - This afternoon, the U.S. Treasury Department alerted Attorney General Ken Cuccinelli that it would release $115 million due to Virginia for his office's role as the lead investigator in a 2012 Abbott Laboratories Medicaid fraud settlement.

The attorney general's office received a letter from Treasury's Executive Office for Asset Forfeiture (TEOAF) that a decision had been made on the disbursement. Subsequent phone calls with TEOAF confirmed the $115 million figure.

"I am grateful to Treasury's Executive Office for Asset Forfeiture for agreeing to work with us to get this money to Virginia law enforcement," said Cuccinelli. "We have been planning for more than a year to use this money for equipment and training to benefit law enforcement and communities throughout Virginia.

"This money is coming to Virginia because of the hard work and dedicated service of the staff of the Virginia Medicaid Fraud Control Unit. I want to thank them for their distinguished service to the people of the commonwealth," he said.

In a news conference earlier today, Cuccinelli detailed how he wanted the money to be spent on law enforcement. He also gave an accounting of the struggle to get the money to Virginia.

The Office of the Attorney General has no indication of when the money will be disbursed.

Additionally, some reporters have asked for clarification about what part of the Abbott settlement went to help Medicaid recipients. That money has already been disbursed.

The May 2012 $1.5 billion Abbott settlement was divided into (1) $800 million in civil settlements with the federal government and the states and (2) $700 million in criminal fines and forfeitures.

Under the civil settlement, Abbott paid $800 million to the federal government and the states to settle claims for defrauding Medicaid and other government health care programs. That part of the settlement has already happened and the money went to reimburse Medicaid and other programs to help beneficiaries.

Under the criminal portion, Abbott paid the federal government a criminal fine of $500 million, it paid $1.5 million to the Virginia Medicaid Fraud Control Unit for investigative costs, and it forfeited assets of $198.5 million to go to the investigative agencies for law enforcement purposes. Virginia's $115 million today comes from that asset forfeiture money,which is required by federal regulations to be used for law enforcement purposes.

Feds refuse to release $125 million owed to Virginia law enforcement

- IRS holding up release of funds -

RICHMOND (June 5, 2013) - Federal officials have refused to release approximately $125 million that is owed to Virginia from a 2012 Medicaid fraud case Attorney General Ken Cuccinelli's office investigated. The Virginia case led to the second largest Medicaid fraud settlement in U.S. history at the time. Federal officials have said that the IRS has refused to properly fill out post-case paperwork for almost a year, which is holding up the disbursement intended for Virginia law enforcement.

Cuccinelli's office earned the money by being lead investigator in the fraud case. Although the money was the office's to keep, Cuccinelli hasbeen making plans for more than a year to use the majority of the proceeds for grants to local police and sheriffs' departments to buy needed equipment such as bulletproof vests, tactical vehicles, and police cars. He has also requested that $20 million be set aside to create a perpetual fund for continuing training for Virginia's local prosecutors.

The $125 million is Cuccinelli's office's approximate share of a $198.5 million asset forfeiturethat was part of the $1.5 billion plea agreement reached with Abbott Laboratories in May 2012 (see the May 2012 news release). Abbott had illegally marketed the prescription drug Depakote for non-approved uses. Abbott paid the full amount of the forfeiture to the U.S. Treasury Department in October 2012, yet Treasury has refused to release the money owed to Virginia.

"During the eight months the Treasury Department has been withholding the money, they have been depriving Virginia law enforcement of tools to make their jobs safer," said Cuccinelli. "The interest alone on Virginia's share of the money in those eight months would have totaled more than a half million dollars. That interest could have purchased more than 1000 bulletproof vests for police officers and sheriffs' deputies."

The attorney general's office submitted an accounting of more than 38,000 man-hours it worked on the Abbott case - the most of any agency involved, and a number the federal government has not disputed. Treasury Department guidelines call for the federal government to keep 20 percent of the $198.5 million as an administrative fee, then distribute the remainder in proportionto the hours expended by each agency involved in the investigation. Despite repeated requests, the federal authorities have not revealed precisely how many hours federal agencies spent on the investigation. However, based on what is known about the time other agencies spent on the case, it is estimated that Virginia's Medicaid Fraud Control Unit performed at least 80 percent of the investigative work (resulting in the estimated $125 million calculation).

Cuccinelli detailed the back-and-forth between his office and the federal government. "In August 2012, I was informed by the U.S. Attorney's Office for the Western District of Virginia of a plan to allocate $95 million of the $198.5 asset forfeiture to Virginia. They said it was the most any state had ever earned in a case and that Virginia should be satisfied with such a large amount of money. However, our analysis of the Treasury guidelines indicated Virginia should receive approximately $125 million, $30 million more than the federal proposal. The smaller Virginia share meant the federal government had notfollowed its own rules regarding the division of dollars and instead decided to change the rules in its own favor when it was time to distribute the money," said Cuccinelli.

"Later, Treasury officials told us they wouldn't even turn over the $95 million because of the sequester. This is despite the fact that it's not federal money, but money that a private defendant paid to settle a case - money which was to be turned over shortly thereafter to our office and the other agencies involved in the investigation.

"Now the hold-up is the IRS, which, according to the Treasury Department, refuses to complete its paperwork so the money can be properly distributed. The exact amount of the forfeiture was known since September 2011 and finalized in a May 2012 plea agreement. It doesn't take a year to complete the paperwork.

"For months, we thought this was just incompetence by the IRS, but with its refusal to properly fill out fairly simple paperwork for an entire year, we are left to wonder if this involves more deliberate motives. Virginians need to know that for eight months the administration has been withholding money that is supposed to be used to protect first responders' lives. To date, Virginia has not received $125 million, or $95 million, or even $1 of these funds.

"While the federal government has kept nearly $575 million in fines and asset forfeiture from the case for itself, it makes excuses and refuses to turn over the $125 million Virginiais due.The only reason the federal government has this moneyis because of a multi-year, 26-state investigation initiated and led by Virginia's Medicaid Fraud Control Unit.

"My office has had a positive, long-standing working relationship with our federal partners to fight gang crimes, human trafficking, and financial crimes. We want to continue that positive relationship, which is why we have been extremely patient in this matter. However, our responsibility to the safety of the people of Virginia requires that we be patient no longer," said Cuccinelli.

Cuccinelli is making this matter public to put pressure on the federal government to turn over the money immediately.

Proposed uses for the money

In anticipation of receiving this money, more than a year ago Cuccinelli's deputies began to quietly talk with some local law enforcement officials to assess their needs. From those discussions, the attorney general developed several proposals, including (this is a partial list):

making crisis intervention training available to police departments, sheriffs' departments, correctional workers, fire/EMS workers, and other first responders, so they have the tools to respond to situations involving individuals struggling with mental illness;

grants for local law enforcement agencies across Virginia to purchase a wide variety of needed equipment such as bullet proof vests, vehicles, firearms, bicycles, winter weather gear, nonlethal engagement devices, radio systems, and computer equipment;

ongoing training for law enforcement to help them investigate and interdict human trafficking and gang offenses;

funding for investigation of DNA evidence in court case files and police investigative files to identify perpetrators in unsolved cases or to exonerate those who may have been wrongfully convicted;

continuing education and training required of Virginia's local prosecutors; and

specialized equipment for the Office of the Attorney General's computer crimes section so it can more effectively investigate and prosecute Internet predators and crimes involving the creation and distribution of child pornography.

Background

Virginia's Medicaid Fraud Control Unit (MFCU), part of the Virginia Office of the Attorney General, initiated and led an investigation of Abbott Laboratories regarding off-label use of the prescription drug Depakote.

Although neither the whistleblowers nor the defendant in this case were located in Virginia, the whistleblowers came to Virginia because the MFCU has a national reputation for successfully investigating major national cases, such as the Purdue Parma Oxycontin case, the Octagon case, and others.

Following Virginia MFCU's initial investigation, the unit contacted the U.S. Attorney's Office for the Western District of Virginia because of their history of working together on such cases. They then began a joint investigation.

MFCU investigators were assigned to the investigation full-time and spent more than four years and 38,523 man-hours on the investigation, traveling to 26 states to conduct interviews and sifting through more than one million records looking for evidence.

The investigation uncovered that Abbott illegally marketed Depakote for non-approved uses, including as an alternative to antipsychotics to treat dementia patients in nursing homes, and for schizophrenia. The investigation also revealed that Abbott paid rebates to health care professionals and long-term care pharmacies for increasing their off-label use of Depakote.

In September 2011, Abbott agreed to the settlement that was ultimately submitted to the court in May 2012. The IRS and the federal government have known for nearly two years the amount of asset forfeiture they would be dividing up when the final court order was entered in October 2012.

Attorney general proposes to fund law enforcement training for responding to crisis situations involving the mentally ill

- $800,000 grant from AG's office would fund more training around state -

RICHMOND (June 28, 2013) - Attorney General Ken Cuccinelli released a proposal today to give $800,000 to the Virginia Department of Criminal Justice Services (DCJS) for training to help law enforcement better respond to crisis situations involving individuals with mental illnesses.

Law enforcement, other first responders, and corrections and jail personnel routinely interact with individuals with mental illnesses. Crisis Intervention Team (CIT) training provides the tools they need to safely deal with these citizens and also helps those who are ill get the proper care they need. Based on a jail survey conducted in 2011, 25 percent of Virginia's inmates had mental illnesses and 12 percent had serious mental illnesses.

The attorney general's $800,000 grant would come from asset forfeiture proceeds earned from the national Medicaid fraud investigation his office led against Abbott Laboratories, Inc. Abbott paid the forfeiture as part of a 2012 settlement. The federal government still holds most of Virginia's $115 million in forfeiture funds, so the attorney general submitted a proposal this week to the U.S. Treasury Department to seek approval to distribute part of the funds to DCJS for CIT training. Cuccinelli will be submitting more proposals to release additional funds for other law enforcement uses in the coming weeks and months. DCJS is responsible for implementing programs and initiatives to improve the functioning and effectiveness of the commonwealth's criminal justice system.

The CIT program is the premier police-based, mental health crisis response initiative in the
country. The program's goals include:

increasing public safety through better identification of, intervention with, and access to services for individuals with mental illness;

reducing injuries to law enforcement and citizens; and

referring people to mental health services in lieu of incarceration when appropriate.

Virginia's CIT programs started in 2001 in the New River Valley in Southwest Virginia. In 2009, the General Assembly enacted legislation to develop CIT programs throughout the commonwealth. As of August 2012, Virginia has 30 CIT programs in planning, developing, or operating stages. The $800,000 grant will not only increase CIT capacity across the state, but will also ensure consistency among the programs.

"This is an important program that will receive funding to ensure that more of our first responders get the training they need to deal with these difficult situations. The added bonus is that it won't be at the taxpayers' expense," said Cuccinelli.

As a state senator and private attorney, Cuccinelli worked to improve the commonwealth's mental health system. Since 1997, when he was in private practice, he served as a court-appointed attorney for individuals with mental illnesses in Virginia's involuntary civil commitment process. After joining the Senate in 2002, he successfully sponsored legislation that provided for more humane treatment of the mentally ill.

In 2008, working in a bipartisan manner, he pushed through a bill to ease the process for involuntary commitment, to restrict gun ownership rights for those with mental illnesses, and to help break down barriers for sharing information between doctors and the court system.

Although the asset forfeiture money is the attorney general's office's to keep, Cuccinelli has been making plans for more than a year to use the majority of the proceeds for grants to local police and sheriffs' departments to buy needed equipment such as bulletproof vests, tactical vehicles, and police cars. He has also requested that funds be set aside for continuing training for law enforcement and local prosecutors.

The Virginia-led Medicaid fraud investigation led to the second largest Medicaid fraud settlement in U.S. history at the time. In May 2012, Abbott Laboratories Inc. pled guilty and agreed to pay $1.5 billion to resolve criminal and civil liability arising from the company's unlawful promotion of the prescription drug Depakote for uses not approved as safe and effective by the Food and Drug Administration.

Attorney General Cuccinelli seeking approval to use fraud settlement to shore up law enforcement retirement funds

RICHMOND (July 26, 2013) - This week, Attorney General Ken Cuccinelli requested that the U.S. Treasury Department release at least $30 million of his office's $115 million in asset forfeiture funds to help shore up two underfunded retirement funds for state law enforcement officers.

Cuccinelli's office sent the proposal to Eric Hampl, director of the Treasury Executive Office for Asset Forfeiture (TEOAF) in Washington. TEOAF holds the remaining $105 million of Virginia's $115 million of asset forfeiture proceeds earned from a national Medicaid fraud investigation the attorney general's office led against Abbott Laboratories, Inc. Abbott paid the forfeiture as part of a 2012 settlement.

The Virginia Retirement System (VRS) maintains two funds for state law enforcement. The State Police Officers' Retirement System (SPORS) is for retired Virginia state police officers. The Virginia Law Officers' Retirement System (VaLORS) is for capitol police officers, campus police officers, conservation officers, ABC special agents, marine resource officers, state correctional officers, and state juvenile correctional officers. The funds are two of the most underfunded of the VRS accounts. Cuccinelli requested that Treasury approve transfers to both funds.

Once Cuccinelli's office has reviewed and assessed other funding proposals from other Virginia law enforcement agencies, a specific dollar amount will be designated for each fund; likely at least $15 million for each.

"It is critical that these retirement funds be preserved so that they can continue to provide the retirement benefits that were promised to public safety officers who have faithfully served their fellow Virginians," said Cuccinelli.

"If Virginia's retirement systems for state law enforcement officers are not on secure financial footing, it could lead to problems in recruitment, morale, and retention that would ultimately have a profoundly negative impact on public safety. These contributions are one way to help. A similar funding request was made and approved by Treasury in a previous case in Rhode Island, so we feel this request should be approved," the attorney general said.

While SPORS and VaLORS are for state law enforcement officers, local sheriffs and police are employed by their local jurisdictions and are under separate retirement systems. Their jurisdictions may be members of VRS or the jurisdictions may manage their own retirement accounts. Local law enforcement retirement funds are generally not segregated from the rest of their fellow public employees' funds like they are for state law enforcement.

Although the Abbott asset forfeiture money is the attorney general's office's to keep, Cuccinelli has been making plans for more than a year to use proceeds for grants to local police and sheriffs' departments to buy needed equipment such as bulletproof vests, tactical vehicles, and police cars. He has also requested that funds be set aside for continuing training for law enforcement and local prosecutors. Cuccinelli will be submitting more proposals asking Treasury to release additional funds for other law enforcement needs in the coming weeks and months.

The Virginia-led Medicaid fraud investigation led to the second largest Medicaid fraud settlement in U.S. history at the time. In May 2012, Abbott Laboratories Inc. pled guilty and agreed to pay $1.5 billion to the federal government and the states to resolve criminal and civil liability arising from the company's unlawful promotion of the prescription drug Depakote for uses not approved as safe and effective by the Food and Drug Administration.